In the second round of federal Paycheck Protection Program loan disbursements, LISC and our SBA lending arm immito are providing intensive technical assistance and underwriting to provide loans to women- and minority-owned and led businesses and nonprofits in underserved communities. The effort is making a heartfelt difference in the lives of hundreds of entrepreneurs and their employees.
Back in mid-March, as Covid-19 was turning the world upside down, Herlinda Pérez-Bocanegra stood in the empty dining room of the Arizona Café, her beloved restaurant in San Antonio's Westside, and cried. It was just a couple of days before she, her staff and many of her regular customers were going to celebrate the 25th birthday of the Tex-Mex diner, but instead, she was locking the front door, for who knew how long. “I was terrified,” she says. “I had no idea what was going to happen.”
Like the majority of small enterprise owners in America, Pérez-Bocanegra (pictured above, at right) doesn’t have the reserves to support her restaurant without daily business, and she had just restocked the kitchen—suppliers needed to be paid, and so did her landlord. “My revenue went down to almost nothing overnight. It was heartbreaking. I had to let all eight of my employees go.” It’s a memory that still brings her to tears.
Pérez-Bocanegra’s close bonds with her customers have provided the little safety net she has—for the past two months, she has been delivering meals to elderly patrons who normally eat at the Arizona Café every day (“I miss my seniors,” she says), and a local law office calls in lunch orders for its staff working from home.
Then, in late April, Pérez-Bocanegra learned she could apply through LISC for the second round of the federal emergency Paycheck Protection Program (PPP), which aims to keep small businesses afloat during and after the pandemic. She and her bookkeeper worked closely with LISC staff to move through the layers of the application and upload what seemed like a daunting array of documents. Within just a few days, she says, she was approved for a $20,600 forgivable loan. Overnight, she had hired back nearly all her staff (childcare and health issues are currently preventing three from returning to work) and was gearing up for a city-sanctioned partial reopening.
Pérez-Bocanegra is one of some 150 small business owners who are receiving PPP loans and technical assistance through LISC and its SBA-licensed lending arm, immito. In contrast to the first round of PPP loans, which was reported to have disbursed much of the $349 billion allotment to larger businesses with established banking connections, the second round, a pool of $310 billion, has presented new opportunities for community-rooted lenders like LISC to direct more loans to smaller, more vulnerable enterprises that lack traditional banking relationships. As of May 11, $42 million in loans, of a projected $60 million-plus, have been approved.
“LISC’s local connections and expertise mean that these loans are going directly to minority- and women-owned and -led small businesses and nonprofits providing goods and services for the benefit of underinvested communities,” said LISC CEO Maurice A. Jones. “We know these funds are a lifeline, and can make the difference between surviving and thriving or having to shut down perhaps permanently.”
To get the loans out the door to businesses in the communities where LISC invests has meant working quickly to identify borrowers who may not have other access to credit, and tapping the networks of LISC executive directors and local small business support partners like the LIFT Fund, which serves the South and Midwest, and the PACE Business Development Center in Los Angeles.
According to the Small Business Administration, the agency has processed more loans in the weeks since the first federal stimulus package was approved in April than it has in the past 15 years. “This has been completely unprecedented,” says Julie Huston, immito’s CEO and a veteran SBA lender. “The SBA traditionally offers loans, but the PPP is designed to be like a grant program to provide relief in a systemic economic crisis. Now, it’s all hands on deck to get these deals through. If we give it our all, it means we can assist them in bridging their way back to recovery.”
The loans being processed by LISC and immito range widely in amount and type of business—from $1,500 to Esayla Williams, the sole proprietor and employee of LaMocha Boutique, a clothing boutique in Cleveland, OH, to a $3 million loan to Classical Charter Schools, an educational consortium with 213 teachers and other staff who serve children in the South Bronx.
Helping small businesses apply for the PPP loans, says Anna Smukowski, LISC’s director of Investor Relations & Capital Strategies, has highlighted the challenges entrepreneurs face in accessing complex credit programs and the intensive technical assistance required. In order to qualify, and for the loan to be forgiven, at least 75 percent of the funds must be used for payroll, and the remaining amount for utilities, rent or mortgage interest payments. “People need a lot of hand-holding and additional guidance,” says Smukowski. But the effort is paying off, she adds. “We’ve heard from a lot of borrowers that working with a CDFI has changed their view of banking.”
Celina Alvarez, executive director of Housing Works CA, an LA-based nonprofit, is one of those borrowers. Housing Works has settled more than 450 formerly homeless people in permanent, supportive housing in Los Angeles—“whatever it takes, for as long as it takes” is the group’s motto, and the high-touch, one-on-one case management at the heart of their model is especially hard to navigate in the midst of Covid-19 and social distancing.
Alvarez describes applying for the first round of PPP as “a mess.” But, she adds, “I’m a firm believer in divine intervention.” The day Alvarez heard the first round of PPP had closed, after multiple unsuccessful attempts to get application support from banks, she received an email from Emma Kloppenburg, a LISC LA program officer, offering to help her apply for round two.
“That was on a Thursday. By Saturday afternoon we had all our paperwork in, and on Tuesday, we heard we’d gotten the loan,” says Alvarez. “I haven’t felt that much joy and assurance since the pandemic started.”
The $325,000, she says, will secure Housing Work’s 30-person payroll in the face of diminishing donations, help bring on additional staff to deliver up to 800 meals weekly to clients, and even support hazard pay for employees who are embedded in the front lines of the group’s work.
Jennifer and Dennis DeLoach, owners of Joyful Hearts Childcare Center in Pawtucket, RI, encountered similar hurdles when they tried to apply for PPP in the first round. Serving primarily working families of color in their area, many of whom are frontline workers in the pandemic, the DeLoaches had hoped they’d be designated an essential business. But the state determined that all childcare facilities should shut down, and the DeLoaches had no choice but to lay off their nine employees.
When PPP was first announced, local credit unions couldn’t help them, because Joyful Hearts wasn’t a member, and the DeLoach’s bank wasn’t forthcoming with support, either. “Their process was very difficult,” recalls Dennis. “It was impossible to tell if things were going through online and if you were completing the application correctly. There was no way to talk to anyone. We were devastated when we heard the funds had been depleted and had no idea if there would be a second chance.”
Fortunately, when the second round opened, the DeLoaches connected with LISC, which has supported the business in the past, and last week Joyful Hearts was awarded a $33,700 loan. “This time, we had someone who provided technical assistance through the whole program,” says Dennis. “I guarantee that if she had not been there to lead us through that, it wouldn’t have happened.”
In the days since the loan came through, the DeLoaches have been able to bring all of their staff back on payroll and begin planning for a June 1 reopening. Under new state health guidelines, the childcare will look very different: parents will drop their children off outside for temperature checks, teachers will wear masks, and learning groups will be smaller. But 32 out of the 39 original Joyful Hearts students are slated to return, and staff are excited to get back work, says Dennis. “They really miss the kids.”
As critical as PPP loan disbursement is to the survival of so many small businesses, it’s not the end of the story. “There’s a lot of this that is still to come,” says Jeffrey Fishman, immito’s chief information officer. “Even though we’re hitting a certain milestone and getting loans out to the people who need them, there’s the whole aspect of forgiveness that has to be sorted out, and making sure borrowers have correct back-up info in order for the government to forgive those loans.” LISC and immito will continue offering technical assistance to PPP borrowers in order to help them past the finish line.
The entrepreneurs, for their part, know they have multiple hurdles to overcome before business is anything like business as usual again. Herlinda Pérez-Bocanegra is waiting to see if that will ever happen. The city of San Antonio is now allowing restaurants to begin opening their doors to a limited number of customers. So last week, the Arizona Café welcomed back a quarter of its usual number of patrons, into a dining room that has been completely reconfigured for social distancing, with servers who are learning to work with new rules. “Everything that comes out of the kitchen has to be disposable,” says Pérez-Bocanegra. “There are lots of gloves and masks and hand sanitizer. That gets pricey. Instead of disposable menus, we’re using white boards. I’ve got to save a dollar here and there.”
Still, the carne asada, meatloaf and chile relleno that the Arizona Café is famous for, and that her customers have been missing, will be just the same. And in an unsettled world, those comforting flavors, and the love that Pérez-Bocanegra puts into making them, are good medicine for the community. “All of us small businesses are in this together,” she says. “We have to have faith over fear, and we have to look after each other. That’s how we’ll get through.”